Sounds to me like ESWW was the victim and not the wrong doer. Are they ever going to bust that dude Pangia? Cripes, I can't believe that he's getting away with this stuff.......
ZERO DEGREES OF SEPARATION, PART I – NORTH OF THE BORDER
December 3, 2001
They call it six degrees of separation. As the theory goes, each of us is connected to everyone else in the world through a path of six people – or fewer. As we learned this week, sometimes the number is much smaller. Take, for example, an individual named Teodosio Vincent Pangia. Most investors probably never have heard his name, but Mr. Pangia owns, controls, or has been affiliated with, a series of companies that might ring a bell (particularly since some have been mentioned on Stock Patrol), like EPA Enterprises, Inc.; Environmental Solutions Worldwide, Inc. (OTCBB: ESWW); Grand Enterprises, Inc.; Altea Investments, Ltd.; Gata Investments, Ltd; and TVP Consulting. Some of those companies have, in turn, been associated with such public companies as Infotopia, Inc.(OTCBB: IFTA), Ives Health Company, Inc, and Delsoft Consulting, Inc., and such private companies as Capital Advisory Partners LLC, Kilkenny Group LLC; Rathgar LLC; Finglas LLC; and Monkstown LLC. And that’s just two or three degrees so far.
Are there common threads that connect these myriad companies? In this series of articles we explore their varied relationships, and search for that common ground.
An APB From OSC on EPA
We first noticed Mr. Pangia’s name in a recent release from the Ontario, Canada Securities Commission (OSC). On October 23, 2001 the OSC charged that Mr. Pangia, an individual named Agostino Capista, and Dallas/North Group Inc. made more than $1.38 million by selling unregistered shares of EPA Enterprises, Inc. to the public between March 1995 and February 1996. During that period, Pangia was Chairman and Chief Executive Officer of EPA, a Company that purported to be engaged in the development of a device for reducing automobile emissions. EPA shares were traded on the Vancouver Stock Exchange. Pangia also was President of Dallas/North, a private Canadian company that was allegedly in the equestrian business.
According to the OSC, Pangia orchestrated the sale of the shares through three brokers at the firm of TD Evergreen who acted at his direction. The OSC alleges that Pangia determined the number of shares to be sold, dictated the sales price, and directed that the proceeds be delivered to Dallas/North and Envirovision International, Inc., a private Canadian corporation that had been formed at Pangia’s direction to facilitate the sale of EPA shares.
On March 8, 1995 the Vancouver Stock Exchange halted trading of EPA shares pending completion of a reverse-merger. The most recent reports available for EPA through Canada’s SEDAR System (roughly the equivalent of the U.S. Edgar System) are for the year 1997. They include financial reports which indicate that, for the year 1997, the Company had income of $227.
That 1997 financial report stated that the Company had entered into an agreement to swap EPA shares for stock of a U.S. company called Ecology Pure Air International, Inc. It is unclear whether this is the reverse-merger that was pending at the time the Vancouver Stock Exchange suspended trading of EPA shares, or whether any reverse-merger was ever completed.
The report also indicated that the Company had advanced approximately $1.1 million to a United States company which shared a common director with EPA. Was Pangia the director involved in that transaction? EPA did not identify either the U.S. company or the common director, and there is no indication whether the money was ever repaid.
In any event, trading of EPA shares remained suspended or halted until March 5, 1996, at which time the stock was delisted by the Vancouver Stock Exchange. Records of the British Columbia Securities Commission reveal that trading of E.P.A. shares had been halted on eight occasions between October 1989 and August 1997. The most recent order cited EPA’s failure to file proper financial statements in 1997 – a matter that apparently never was rectified.
The apparent demise of EPA was, however, not the end of the line for Mr. Pangia. He was just moving some of his operations south.
Going Worldwide
BBC Stock Market, Inc. was formed as a “blank check” shell corporation in 1987 for the purpose of acquiring new businesses. Apparently it took awhile, but in January 1999, BBC acquired a Canadian company called BBL Technologies Inc., and changed its name to Environmental Solutions Worldwide, Inc. At the time, BBL purportedly held the Canadian patent to a catalytic converter/muffler technology.
According to documents filed by Environmental Solutions with the Securities and Exchange Commission, Teodisio V. Pangia apparently was one of the principal shareholders of BBL. As a result of the merger, Mr. Pangia received 3,170,975 shares of Environmental Solutions common stock – more than 11% of the outstanding shares – in the name of Tyler Dylan Corporation, a Canadian corporation that was wholly owned by Pangia.
Pangia had in fact been associated with BBC prior to the BBL acquisition. A Form 10 Registration Statement filed by Environmental Solutions in November 1999 disclosed that TVP Consulting Services, a company controlled by Pangia, had served as a consultant to BBC (subsequently Environmental Solutions) since November 1997, and had been paid consulting fees of $64,000 in June 1999.
Pangia’s biography, as presented in the Environmental Solutions Registration Statement, revealed that from 1994 through 1997 he had been a director and Chief Executive Officer of Ecology Pure Air International, a Canadian company engaged in the business of developing an automobile fuel catalyst. Could that be EPA – which certainly sounds like an acronym for Ecology Pure Air? According to published reports, at the time he left, the Ecology Pure Air Board of Directors accused him of diverting more than $1 million to his own account. Did that claim refer to the $1.1 million that EPA had advanced to a U.S. company with which it shared a “common director?”
That biography also noted that a petition in bankruptcy brought against Mr. Pangia in the Ontario Court of Justice 1997 had been subsequently dismissed.
Environmental Solutions did not register the 3,170,975 shares issued to Pangia as a result of the BBL acquisition, but by February 2000 the Company did not need to -- Pangia had held the stock for about one year, meaning that some, or all, of the shares would soon be eligible for sale under Rule 144.
The timing seemed fortuitous. On February 25, 2000 Environmental Solutions issued a press release announcing that “California-based Access 1 Financial” had issued a buy recommendation for the Company’s shares, predicting sales of $35 million in the year 2000, “and a 6-month price target of $15.”
The report seemed to have an immediate impact upon Environmental Solutions shares. The stock, which had been trading at just over $4 per share in mid-February, began to creep up – hitting $5 on February 24th. Once the report was released, share prices continued to soar, up to $7.75 by March 6th, before dipping back under $1 in mid-April.
What was Access 1, and why did they decide to write a glowing report and make such bold predictions for a Company that had no income, no manufacturing operations, and showed just $21,000 in the bank at the end of 1999? An April 28, 2000 article by Bloomberg.com’s David Evans offered some insight. According to the Evans article, Mark Bergman of Access 1 claimed that he received $25,000 and 30,000 shares of Environmental Solutions stock from Teodisio Pangia in exchange for writing the report. And, according to Evans, on March 13, 2000, Pangia filed with the Securities and Exchange Commission a notice of his intention to sell all of his 3,170,975 shares.
Evans noted that, according to Alan Bromberg, a professor of law at Southern Methodist University in Dallas, Texas, and co-author of a noted treatise on securities fraud, “that sequence of events…makes it seem like a ‘classic pump-and-dump’ operation.” This seemed particularly true since the “research report” did not acknowledge that Access 1 had been paid for its services. Columbia University law professor John Coffee added his view that the scenario seemed “consistent with a short-term manipulation of the market for the benefit of a selling insider.”
Investors who relied on the report were in for a few additional shocks. Bergman and Access 1 were public relations consultants – not stock analysts. They were promoting the stock, not analyzing the Company. And, according to Environmental Solutions’ CEO Bengt Odner, that $35 million revenue prediction had no basis in fact. Indeed, the Evans article quotes Mr. Odner as stating that “[t]he projections are wrong…It’s absolutely appalling. I know we’re not going to have production this year.”
Despite Mr. Odner’s remarks, Evans reported that Bergman stood by his projections, insisting that they were based upon information provided to him by – who else – Teodisio Pangia. Pangia, Evans said, claimed that he only provided Bergman with “general” information, and denied paying any fee to Access 1.
Environmental Solutions has yet to realize anything approximating $35 million in annual revenues. For the nine months ended September 30, 2001, the Company’s sales totaled less than $400,000. During the month of November 2001, Environmental Solutions stock has traded at prices between 20 cents and 50 cents.
One thing seems clear, however. Pangia did make a series of Form 144 filings, advising the SEC of plans to sell 1,071,725 shares on March 1, 2000; 1,071,725 shares on May 18, 2000; 506,000 shares on August 25th, 2000; and 708,800 shares on March 1, 2001 – for a total of $5.9 million. Not a bad return when you remember how he obtained those shares in the first place –in exchange for his interest in BBL. The Environmental Solutions public filings suggest that Ball’s principal asset was a Canadian patent for a catalytic converter technology. And what value did the auditors for Environmental Solutions place on that patent? $2,327.
Was there any rationale for the timing of Pangia’s sales? Under Rule 144, an “affiliate” of a public company – and that includes someone who owns 10% of the company’s stock - may sell only a limited number of those shares within any three month period. In March 2000, when Pangia started selling, he owned about 11.3% of the outstanding Environmental Solutions stock (through Tyler Dylan Corp.). That might explain the pause between March and May 2000.
Mr. Pangia may have sold his shares of Environmental Solutions, but that does not mean he has ended his involvement with public companies. In the next part of this series we will explore connections between some of the entities he controls, a couple of old friends (Infotopia and Ives Health Company), and some newer acquaintances - like Grand Enterprises; Capital Advisory Partners; Kilkenny LLC; Finglas LLC; Rathgar LLC; and Monkstown LLC.
Stay tuned.
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